A lawyer for Sientra said the company was cooperating with the investigations.
Just a few weeks earlier, the SEC penalized China-based Cheetah Mobile Inc.’s Chief Executive Officer Sheng Fu and its former president, Ming Xu, over the sale of American Depositary Shares of the company. The agency didn’t accuse the company of breaking securities rules.
The SEC alleged that in 2016, the two planned to sell shares after learning that revenue from a key advertiser was in decline. The well-timed sales allowed them to avoid about $300,000 in losses, according to the SEC. The two agreed to settle with the regulator by paying a combined $756,000, without admitting or denying wrongdoing.
Cheetah Mobile’s investor relations’ representatives didn’t respond to multiple email messages seeking comment. Lawyers that served as defense counsel for the individuals in the case didn’t respond to voice and email messages.
Surveillance Gaps
Prearranged plans are appealing to corporations and executives because, if properly used, they can give a solid defense against insider-trading allegations.
But executives often adopt short-term trading plans and sometimes only for a single transaction, according to a recent academic review of 20,000 plans. The study by business professors from Stanford University, the University of Pennsylvania and the University of Washington, found a wide disparity in the amount of time between the adoption of a plan and the first trade. About 82% had so-called cooling-off periods shorter than six months.
US officials including SEC Chair Gary Gensler -- and his Trump-era predecessor Jay Clayton -- have said the agency’s rules for the plans have led to gaps in its surveillance of potential insider trading. Among the changes that the agency proposed last December is a four-month waiting period for executives between a plan adoption and the sale of shares. No such waiting period is currently required.
For years, records of the prearranged trades were submitted to the SEC on paper, stored in filing cabinets and destroyed after a period of time. The agency has started making the filings available online.
--With assistance from David Scheer and Gao Yuan.
This article was provided by Bloomberg News.